What Low-Income Housing Tax Credits Are

Low-Income Housing Tax Credits (LIHTC) are federal tax incentives that developers and property owners use to build or renovate rental housing for people earning below a certain income threshold. The government doesn't give money directly to tenants; instead, it gives tax credits to investors and developers who finance affordable housing projects. Those credits reduce the taxes those investors owe, which makes the project financially viable for them. The result is rental units that stay affordable for 30 years or more.

You don't explore for LIHTC yourself. Instead, you find housing that was built or preserved using these credits, and you pay below-market rent because the property owner receives this tax benefit. The program is administered at the state level — each state has a housing finance agency that awards credits to projects, sets income limits, and oversees compliance.

LIHTC is the largest federal program funding affordable rental housing in the United States. It produces roughly 100,000 units per year across all states combined, though the number varies year to year based on federal funding.

Key Takeaways

  • LIHTC properties are rental units where rent is capped based on your income, typically 30 percent of what you earn annually.
  • You find LIHTC housing through your local public housing authority, nonprofit housing organizations, or your state's housing finance agency.
  • Income limits vary by state and county, and they are set based on the area median income — not a fixed national number.
  • Once you move in, your rent stays affordable for the life of the property's tax credit agreement, which is at least 30 years.
  • LIHTC properties often have waiting lists because demand exceeds supply in most markets.

How Income Limits Work in LIHTC Housing

LIHTC properties set rent based on your income, not on what the market would charge. Most LIHTC units are reserved for households earning 60 percent of the area median income (AMI) or less. Some properties also set aside units for households at 50 percent AMI or even 30 percent AMI, which serve the lowest-income renters.

Area median income is calculated by county or metropolitan area and changes every year. A household earning 60 percent AMI in rural Kansas is a different dollar amount than 60 percent AMI in San Francisco. Your state's housing finance agency publishes these income limits annually, usually in March or April. You can find your county's limits on your state housing finance agency website or by calling the agency directly.

Rent in an LIHTC unit is typically capped at 30 percent of your gross monthly income. If you earn $2,000 per month, your rent cannot exceed $600. This stays true even if market rents in your area climb higher. The property owner is bound by the tax credit agreement to maintain this rent cap for the entire compliance period.

Finding LIHTC Properties in Your Area

LIHTC housing is not advertised in one central place. You have to search multiple sources because each property owner lists vacancies separately. Start with your local public housing authority (PHA) — they maintain lists of affordable properties in your area and can tell you which ones use LIHTC. Call the PHA's main number or visit their website; most have searchable databases of available units.

Nonprofit housing organizations in your state also manage LIHTC properties. Organizations like Catholic Charities, Lutheran Social Services, and local community development corporations operate affordable housing. Search "[your state] nonprofit housing" or "[your county] affordable housing nonprofits" to find organizations near you. Many have websites listing current openings.

Your state's housing finance agency maintains a directory of all LIHTC properties in the state. Visit the agency's website and look for a searchable database or contact information for properties. Some states make this straightforward; others require you to call the agency directly. The agency can also tell you which properties have current vacancies.

Websites like HotPads, Zillow, and Apartments.com sometimes list LIHTC units if the property owner posts there, but they don't filter by program, so you may have to call properties to confirm they participate. The most reliable method is contacting your PHA or state housing finance agency directly.

Income Verification and the process Process

When you find an LIHTC property with an opening, you will need to prove your income falls within the property's limits. Bring recent pay stubs (usually the last 30 days), a letter from your employer, or tax returns from the previous year. If you receive benefits, bring documentation of those payments. If you are unemployed, bring documentation of unemployment benefits or other income sources.

The property will also run a background check and contact previous landlords. LIHTC properties have the same screening standards as market-rate rentals — they check for eviction history, criminal history, and rental payment record. Meeting the income limit does not may provide you will be approved; you still have to pass the property's screening criteria.

The process itself is straightforward: you fill out a form with your household information, income, and references. There is no fee to explore. Processing usually takes one to three weeks. Some properties have waiting lists if they have more interest than available units.

Income Recertification and Rent Changes

Most LIHTC properties recertify your income once per year. You will be asked to provide updated pay stubs or tax returns to confirm you still meet the income limit. This is routine and does not put your tenancy at risk — the property is required to keep you as a tenant even if your income rises above the limit, though your rent may increase.

If your income rises above the property's limit, your rent will typically increase to market rate or to 30 percent of your new income, whichever is lower. This happens gradually over time, not all at once. The property owner is required to give you written notice before any rent increase takes effect, usually 30 to 60 days in advance.

If your income drops, your rent stays at 30 percent of your new, lower income. You benefit from income decreases; you do not lose housing because you earn less.

The 30-Year Affordability Commitment

LIHTC properties are required to keep rents affordable for a minimum of 30 years from the date the property receives its tax credits. Some properties commit to longer periods — 40 or 50 years. This is written into the property's deed and is binding on all future owners. If the property is sold, the new owner must honor the affordability requirement.

This long-term commitment is what makes LIHTC different from other affordable housing programs. You are not in temporary housing; you are in a property that will remain affordable for decades. However, the property can be converted to market-rate housing once the compliance period ends, so affordability is not permanent.

During the compliance period, the property is monitored by your state's housing finance agency. The agency conducts audits to may support the property is following all LIHTC rules, including rent caps and income limits. If a property violates the rules, the agency can impose penalties or require the property to repay tax credits.

LIHTC vs. Other Affordable Housing Programs

LIHTC is one tool among several that create affordable housing. Public housing, Section 8 vouchers, and project-based Section 8 are separate programs with different rules. LIHTC properties are privately owned and managed, whereas public housing is owned by housing authorities. LIHTC units do not require a voucher; you pay rent directly to the property owner based on your income.

The main advantage of LIHTC is stability: rent stays affordable for 30 years, and you do not have to reapply for a voucher or worry about losing your housing if a program is defunded. The main disadvantage is availability — LIHTC units are scarce in most areas, and waiting lists are common. You may have to wait months or years for an opening.

Many people use LIHTC housing while also on a Section 8 waiting list. If you are offered a Section 8 voucher later, you can move to a different property and use your voucher there, or stay in the LIHTC unit if you prefer.

Frequently Asked Questions

What happens to my rent if I get a raise or lose my job?

If your income rises, your rent will increase to 30 percent of your new income or market rate, whichever is lower — but the property must give you 30 to 60 days' notice. If your income drops, your rent decreases to match your new income. You cannot be evicted for a rent increase caused by rising income.

Can I be evicted from an LIHTC property?

Yes, for the same reasons as any rental: nonpayment of rent, lease violations, or property damage. Income limits do not protect you from eviction for cause. However, you cannot be evicted straightforward because your income rose above the property's limit.

Do I need a Section 8 voucher to live in LIHTC housing?

No. LIHTC is a separate program. You pay rent directly to the property owner based on your income, with no voucher involved. You can use a Section 8 voucher in an LIHTC property if the owner accepts vouchers, but it is not required.

How long does it take to get approved for an LIHTC unit?

Processing usually takes one to three weeks after you submit your process and income verification. Some properties have waiting lists if they have more interest than available units, which can add weeks or months to the timeline.

What if there are no LIHTC properties with openings in my area?

Ask your public housing authority or state housing finance agency when new LIHTC properties are expected to open. You can also ask to be placed on a waiting list for properties you are interested in. In the meantime, explore Section 8 vouchers, public housing, or other affordable housing programs in your area.